Network: March 1992
Price of Friendship
When friends visit his bicycle sales-and-repair business, Bryan Chaney wants to offer them a discount. But he wants to be consistent. What should his policy be (Such a Deal, December, [Article link])?
Letitia Baldrige, etiquette's doyenne and the author of Letitia Baldrige's Complete Guide to Executive Manners (Rawson Associates, New York, 1985, $29.95), observes: "The consistent policy should be no discount. A very gregarious person would go broke quickly if he gave a discount to anyone he considered a friend. Instead, make a joke about it. Tell your friends, 'Like Tiffany's, I can't give discounts. I simply have too many friends.' Be tough, and be tough with everyone. If you start dividing friends from those who are not quite friends, all will get hurt." Other readers agreed.* * *
I couldn't help chuckling about this letter. Whether your friends expect a discount is beside the point. What is a realistic, market-driven price for your service? Once you determine that, charge it to strangers, friends, and relatives: a customer is a customer. Real friends won't wonder, What kind of discount will he give us? They'll think, How much more would we pay him, since he is our friend?
Breazeale & Associates
You're right to worry. A friend may tell another customer about his special price and cost you more than profit. Explain to friends that they get the same high quality and low price that all your customers do. Tell them they can't expect a discount unless they want to see you out of business. A true friend won't expect special treatment.
Empire Information Services
Old Sports Injury
Lynn Gage can't find an underwriter to insure her new sports product against liability (Risk Takers, December, [Article link]). One reader suggests that she might want to reconsider before she looks any further.
Any general-insurance broker can provide the names of people offering insurance for products such as yours. But since this is a test product, you may do better to partner with a company that is already in the business and is insured for many types of liability. You'd take advantage of that company's coverage and expertise, and you'd reduce the cost of marketing.
Taxing His Health
Tore Arnesen wants to give himself a corporate membership to a country club and write it off through his C corporation as a business expense. His accountant told him he'd have to pay taxes on it as a fringe benefit, even though his big-company peers don't have to (Fit for Taxes, December, [Article link]).
You may deduct country-club dues only if the active conduct of your company's trade accounts for more than 50% of your total use of the club -- including your family's use. (Personal expenses such as meals or drinks will be taxed as compensation, in any case.) Perhaps your accountant doubts your use of the club will meet that requirement. If you disagree, you should keep good records of your personal and business use; consider a restricted membership that includes use of the dining room but not the golf course; and establish a documented corporate policy restricting nonbusiness use of the membership.
Golden State Tax & Business Service
Reading, Writing, and Reps
As his teacher-training company expands, Joe Pitts needs to recruit more salespeople. He prefers to hire teachers as sales reps. In January he asked how he could identify, screen, and recruit candidates in unfamiliar territory (Teacher, Teacher, January 92, [Article link]).
Contact the National Education Association (202-833-4000) and the AFL-CIO (202-637-5000); most teachers are represented by one or the other. Both publish newsletters in which you could advertise. Also, ask state education departments for lists of teachers' colleges. Many teachers are looking for employment; screening will be the difficult part. I'm a teacher first and an entrepreneur second, but I know how difficult it is to identify better-than-adequate teachers. Ask your two or three master salespeople to develop a list of criteria and questions that would identify superior candidates. You might even send those master salespeople out to recruit. Here in New York State, the state universities overflow with recent graduates who substitute teach while they wait for steady employment. If your recruiters spent one week in Buffalo, you'd end up with more candidates than you can imagine.